The Abrams Clean Tech Report

 

On the City of San Jose’s Cleantech Team…

Monday, January 19th, 2009

Well, another year has come to a close and another begins. I hope everyone had a great holiday and I wish you all a very happy New Year.

For everyone buried in work at the end of Q4, I’ll just sum up the year by saying that it was a phenomenally fast-moving year on the cleantech front. Just trying to keep an eye on where the early stage stuff was getting moved through the chute – and how fast it was moving – and what money was moving what – was hard. Some really interesting things happened, too. You may have heard that the California Clean Tech Open announced a collaboration this last year with the National Lab system on green buildings; and that it is now expanding regionally, across the U.S. is significant in and of itself. And though it was late in ’07 that the DoE’s Commercialization Team announced it was putting entrepreneurs in residence in their labs to help identify and speed commercialization of novel cleantech IP, tightening and deepening their relationship with venture capital, this program really started to move forward more in ’08. And now that Steven Chu has been made Energy Chief – well, I was really pleased to hear that.

Other really cool things happened this year, too – everywhere I turned this last year, there was an opportunity to speak with companies building green businesses, clean technologies, eco-cities, smart building technologies and reinventing transportation options, as well as new water purification technologies being borne in labs, and – well, I could keep going. And the job creation possibilities from all this? Phenomenal. In the midst of such a spectacularly awful economic nosedive, it’s been clear to see that the old has been dying away, and is being replaced by the new.

That 2008 ended with a record number of cleantech funding deals closing the 4th quarter, rounding out another record year of cleantech funding from the venture capital community, isn’t surprising. That said, (as I’m sure you’re not surprised to hear) we’re likely to see vc investment in cleantech in ’09 decline somewhat, given the economic conditions of the moment. The decline in VC funding is, I’m guessing, likely to be offset somewhat by the amount of money one would expect to see coming into cleantech from government initiatives. We’ll see. From those companies that raised sufficient capital prior to Q3 ’08, to scale production and establish initial manufacturing facilities, we’ll probably see some very interesting growth activity in ’09. For those that aren’t holding 24 months of cash, we’ll have to see. VCs are getting very particular about which companies in their portfolios they will continue to support through this downturn, and investment dollars, as you all know, aren’t so easy to come by.

What’s now apparent, in the current economic climate, is that organizations that have been able to speed things cleantech through the hopper to commercialization and production are now, more than ever, really critical to a company’s success – and along with it – a company’s ability to execute.

What this means is that especially since operating cash isn’t so readily available or easy to come by, the speed with which a company can garner support for commercialization and production of its cleantech products and services is key. One thing investors can do is work with local/regional government entitites who can provide some level of growth support.

One city – the city of San Jose – is showing great support to companies going through its incubators. Towards the end of last year, I had a chance to speak with Collin O’Mara, the city of San Jose’s Clean Tech Strategist. Collin’s the strategic lead for Mayor Chuck Reed’s Green Vision, a 15-year plan to turn San Jose into the world’s epicenter for clean tech innovation. O’Mara and his team also happen to lead San Jose’s Clean Tech Strategy team, which is focused on development relationships with investors and companies the team can bring into the City of San Jose, where these companies can grow and develop and bring jobs to the city – - they work not only with their incubator staff teams, but with the vc community, universities, investors, and entrepreneurs as well as regional and national government.

“We can work with investors and companies at the speed of Silicon Valley in the way that no other government organization can. And we’ve been successful in going to the federal government to get guaranteed loans. We work closely with the DoE, the PuC, and venture capitalists, and we partner with experts to make sure to target those to go after (i.e. Tesla) – to put them into our incubator network to be successful. It’s not something we do in a vacuum to figure out if San Jose can be a fit for a company. And while a lot of communities have a “one size fits all” approach, we find it doesn’t make sense for us here. The best we can bring to the table is speed. That’s worth more to them than any million dollar incentive. And when as a clean tech company you need to conserve cash as long as possible, then you want speed – and speed then becomes most important.”

O’Mara clearly understands that the time is now to focus on adoption and realizing the promise of technologies with massive applications, so his team is running hard. While they’re happy the city can now count 40 clean tech companies within its boundaries now, O’Mara’s boss, Mayor Reed, has made it official that he wants to create 25,000 clean tech jobs within a decade, so O’Mara and his team are on the hunt to find, groom and grow the next potential cleantech stars. Already the city has partnered with the California Clean Tech Open to place top-ranked competitors in San Jose’s Environmental Business Cluster, the country’s top incubator for environmentally oriented startups. San Jose’s pushing new cleantech companies through the EBC and the San Jose BioCenter, helping develop the companies operationally, and where necessary, helping to secure funding options for the next step after the incubator.

What’s unusual about San Jose’s clean tech strategy team is that a) it exists, and b) it has fingers into pretty much all the high caliber venture capital firms and thought-leadership available in the Bay Area’s surrounding universities; and c) its speed to action. I have a friend who teaches at Kellogg, and not too long ago said to me that he loves how things get done out here, even compared to Chicago. “Things just seem to move faster in Silicon Valley,” he said. “People make things happen very fast.” Another friend from NY commented that things moved even faster than they do in NY. Honestly, I think they do, too.

When I asked Collin what he was most interested in, in terms of new business development opportunities, he told me he was interested in anything having to do with renewable energy, biofuels (particularly synthetic applications), advanced applications for transportation, green building controls as well as monitoring applications; smart metering technologies, lighting, hvac, heating and cooling systems. He also noted the incredible amount of innovation the city was seeing from small start ups in LEDs and taillights.

“We think we’re a great fit for high efficiency poly crystalline and concentrated pv, too,” he told me. “Same goes for advanced engineering around turbine design, including microtidal technologies,” O’Mara continued, “And for companies trying to evolve the car – and the infrastructure around it, including anything communications-related (rather than just adapting it), this is the sort of thing that’s right up the alley of a lot of San Jose and more so Silicon Valley entrepreneurs. There’s really just no better environment in which a clean tech company can test and demo new products.”

O’Mara’s boss (and San Jose’s mayor) Mayor Reed, has garnered solid support from the community for its initiative in making San Jose an epicenter of cleantech innovation that’s already recognized as such around the globe. A proponent of cleantech, Reed is considered to have a thorough understanding of the nature of the clean tech universe, and is therefore seen as a real asset to the investor community.
So while O’Mara and Reed know that many of the city’s goals will require monumental policy shifts (last year the team was already ramping up its efforts for ’09, aware that policy shifts had to take a front seat for this year), they’ve got the support of the community behind them.

So if you’re thinking you’re ready to engage the city in a discussion, here are some qualifiers to consider, as the city’s cleantech team will be looking at the same things in doing their due diligence on your investment…(and don’t be shy…the team doesn’t tend to shy away from initial conversations):

-Who are your competitors in the market?
-Is the technology scalable?
-Is it likely to be sustainable as an individual entity/taken over through an acquisition?
-Does the company have the ability to survive in the creative destruction that defines Silicon Valley?

To contact Colin, you can reach him at the City of San Jose’s Web site.

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